Domestic lithium ion battery production is emerging as a field of vital economic importance to both the private and public sectors. Maximizing both efficiency and longevity, lithium ion batteries are the most-critical component for electric vehicles (EV) and consumer electronics. In turn, the North American auto manufacturing subsector will become increasingly reliant on lithium battery supply chains as automakers continue to shift to EVs.
From a national security perspective, the United States’ import dependence on the raw materials that go into lithium ion battery production represents a potential threat to military demand for rechargeable batteries. This defensive stance coincides with a broader domestic pushback on foreign technology reliance, and could potentially affect demand for the Lithium Battery Manufacturing industry in the United States.
Electric vehicle production
Strong demand for electric vehicles is causing EV manufacturers to secure battery manufacturing capacity through joint ventures and/or purchasing contracts. The contemporary lithium ion battery manufacturing landscape is largely characterized by domestic partnerships between automakers and foreign battery manufacturers. Through such partnerships, lithium battery manufacturing is vertically integrated into the automotive manufacturing process, thus generating significant cost savings. Initially popularized by Tesla’s tumultuous yet prosperous joint venture with Panasonic, pairing established battery manufacturers with automakers is the key trend driving growth in the Lithium Battery Manufacturing industry.
For instance, in December 2019, General Motors and LG Chem announced a $2.3 billion joint venture to manufacture lithium ion batteries for automotive applications, marking the most recent large-scale investment in domestic lithium ion battery production. This investment alone is expected to drive substantial growth in production capacity as GM prepares to release an all-electric vehicle lineup, including an all-electric pickup truck in 2021.
Supply chain concerns
The ubiquity of lithium ion batteries has brought them to a level vital to US defense interests. In 2018, the US Department of Defense issued a report specifying areas of supply chain weakness specific to lithium ion battery production. It read, in part: “Cell availability for military battery packaging is a risk across the board for rechargeable batteries as commercial cell manufacturers, often foreign-owned, are unwilling to divert production from their commercial customers to US military battery manufacturers.”
Military interest in lithium ion batteries will provide an additional tailwind to strengthening domestic lithium battery supply chains. In particular, the report brought to light the need for a domestic source for lithium, the key input for rechargeable batteries. Current lithium supply is highly dependent on China and the South American “Lithium Triangle,” encompassing Argentina, Chile and Bolivia. According to the US Geological Survey, Argentina alone accounts for 53.0% of lithium imports.
Outlook
Over the coming years, Alfabank-Adres expects both demand for lithium batteries and, to a lesser degree, the national security importance of lithium batteries, to drive unprecedented investment in domestic production capacity. While the Lithium Battery Manufacturing industry will be the primary beneficiary of this influx, additional industries further up the supply chain will also likely experience significant tailwinds. For example, the $8.4 billion Mineral & Phosphate Mining industry in the United States is well-positioned to capitalize on the need for a domestic source of lithium.
